At hearing, ESDC representatives defend use of consultant AKRF; Perkins slams "egregious conflict of interest" given simultaneous work for developers
In response to Perkins's persistent questions, ESDC officials acknowledged that AKRF always produces studies that allow the agency to find blight and that they choose AKRF through sole-source contracts, despite concerns about the consultant's integrity, such as working for the developer at the same time.
(That occurred in the Columbia case; with Atlantic Yards, AKRF's work for Forest City Ratner and the ESDC was merely consecutive.).
Though they acknowledged there was no checklist to determine blight, the ESDC officials claimed that AKRF's reports were objective, factual reports on neighborhood conditions, allowing laypeople--the ESDC board--to use their "general expertise" determine blight.
And they wouldn't acknowledge any problem with their procedures nor suggest any reforms, saying that was an issue for the legislature. They described a Catch-22 situation in which they expressed an interest in hiring consultants other than AKRF but were forced to rely on AKRF because it was more capable of providing studies that would stand up in court.
That left Perkins incredulous, criticizing the ESDC board's "rubber stamp" actions and proposing that Gov. David Paterson, who in 2005 joined him in 2005 in calling for a moratorium on the use of eminent domain, intervene, "particularly the egregious conflict of interest of using the consultants that the developers are using."
(Here's coverage in the Observer: Who Has the Right to Say What's Blight? Bill Perkins vs. ESDC Darling. Photos by Tracy Collins. At bottom is the full four hour-plus hearing video.)
Good government practices?
The ESDC panel was the first in the hearing, which lasted more than four hours, at the State Office Building in Harlem. Perkins asked the ESDC reps if the practice of using AKRF after it worked for the developer "good government," with "no potential conflict of interest."
ESDC General Counsel Anita Laremont responded, "In this particular case I do, and the reason is the work that AKRF does is to compile a report. It's not a subjective report. They document these flaws. In the case of the Columbia project, there were other consultants that performed the work," leaving AKRF--"they're good writers"--to compile the whole report.
"Ultimately, the blight determination is made by the board," she said. (I questioned how the board could find blight if board members, in the case of AY, couldn't find Pacific Street.)
"Don't you think it appears bad to be using the same consultant as the developer that's applying to you?" asked Perkins, suggesting that the ESDC use other consultants.
"I would not agree with you that appears bad, because you have to look very closely at circumstances," Laremont responded.
Perkins suggested that three judges, in the 3-2 Columbia decision, disagreed. Laremont pointed out that only two judges cited AKRF, while the other judge in the majority ruled on other grounds.
"Forget the judges," Perkins followed up. "Is it a good idea for the developer and Empire State Development to be using the same consultants for blight-type decisions, which are so controversial? Why couldn't we find anyone else?"
"I don't think there's a problem with it, because the analysis is really, ultimately, ours," Laremont responded.
Perkins asked how the ESDC hired its consultants for blight studies.
"We go about it in a number of different ways," Laremont said. "We hired them based on the fact that they were already engaged in working on the Environmental Impact Statement. It was our staff view that their knowledge of the project area was vastly [superior] to other firms and would be more cost-effective."
(She's pictured with Executive Director Peter Davidson.)
Was there a bidding process?
No, Laremont responded; it was a sole source contract.
Conflict of interest
Perkins returned to his theme:"Do you get a sense that the public would find it a conflict of interest or a little collusive to have the developer and ESDC using the same consultant?"
"I have a different view, because I know all the facts," Laremont responded. "But I understand what you're saying."
Perkins asked if the practice is worthy of reconsideration.
Executive VP Darren Bloch responded, "We would concede that members of the public could have concerns about that. To that point, one of the things we did to overcome that perception was actually have a second group and do a similar type study."
Perkins was exasperated: "If you can acknowledge the perception problem, why use them at all? Are there any other comparable consultants in the business that you could have called upon?"
Bloch said the ESDC was challenged to produce a product in which it had confidence.
"They're the only ones in the whole wide world?" Perkins asked, suggesting that, to avoid controversy, the ESDC not choose a consultant with credibility problems.
"From our years of experience in this area, we would say it's our judgment that AKRF is, within New York City, the most qualified firm to do this kind of work," Laremont responded.
"You're saying they're above and beyond all the competitors?" Perkins asked.
"Absolutely," Laremont responded.
"There's no one else that can give you a worthy opinion, a worthy study," Perkins continued.
Defense in court
"We certainly don't want our integrity challenged," said Laremont, noting that the ESDC has "a fiduciary obligation to get the best product we can," so it needs documentation to ensure that its projects, when challenged in court, are backed by "the most foolproof" studies.
"So foolproof that learned judges came to a different point of view," Perkins riposted. "Are you suggesting that the judges--"
"--were wrong," Laremont answered with a smile.
(The challengers in the Columbia case indeed have an uphill battle when the case is heard by the Court of Appeals, which gave broad deference to the ESDC in the eminent domain case concerning Atlantic Yards; the Appellate Division opinion in the Columbia case did not reference the AY case.)
AKRF: "100 percent blight"
Perkins then probed AKRF's performance. "Has AKRF ever found a situation where there was no blight?" he asked, drawing laughs from the audience.
"Let me just say," Laremont responded, a bit sternly. "AKRF does not find blight. Our board finds blight. AKRF does a study of neighborhood conditions. They give us a report, and we make a determination based on that as to whether the area is blighted."
"Have you ever differed with their point of view?" Perkins asked. "Have they ever come back with a determination that was, in your point of view, not blighted?"
"No," acknowledged Laremont.
"Have they ever given you a determination that you concluded was not blighted?" he continued.
"No," she said.
"So from your point of view, they're 100 percent blight?" Perkins asked. "Wherever they go, they come up with blight?"
"What I would say is that, in each case, where we had a blight study done by AKRF in respect of a project, the project has been upheld through all legal challenges, and in each case, the courts of this state have found that our finding of blight was warranted" Laremont said, relying on the state's broad deference to agencies like the ESDC. (She actually referred to the ESDC at one point as an "entity," which is an unusual governmental category.)
Perkins tried to drill down to the ESDCs standards regarding blight after AKRF delivers the facts: "Do you have like a sheet, or some other kind of measures that you use that, when you get facts, you look at them in terms of those measures... and say, bingo, it has measured up to the definition of blight."
"No," responded Laremont. "We use the standard that's set forth in the UDC [Urban Development Corporation] Act, which is that an area be determined to be substandard and insanitary. We have always maintained, in litigation, that it is not a static kind of measurement that can be reduced to specific criteria on a sheet of paper, because it has to do with a number of different factors in various environments."
"What I'm trying to get it is ways that you can assure the public, which is in great doubt right now, that your decisions are on the merits," Perkins said.
"Are you asking for the checklist?" asked Bloch.
"Yes," Perkins confirmed.
"There's no checklist," Laremont said.
Perkins remained quizzical: "So who as a part of the team that looks at the facts of the study and says OK... and they all sort of agree. Is it one individual that reviews the study and makes a determination? Is it a team?"
"When the study is completed, the blight study itself goes into the package of materials that go to our board of directors," Laremont said. "And that is part of the analysis that the directors use to make their determination of whether or not a project was blighted."
(Remember, a crack in the sidewalk is an indicator of blight, according to AKRF's Blight Study in the Atlantic Yards case.)
Laremont offered some history, noting that the UDC was created in 1968 and, in the early years, when the UDC did housing projects--rather than public-private partnerships like AY--it did not conduct blight studies.
"The blight studies evolved over time based on our view that it was appropriate and proper to document empirically a condition of the neighborhood," she said. "That that was much better than simply making a conclusory statement in board materials that we have found an area to be blighted. So we view these studies as a way of having documentation regarding a neighborhood and an area such that we give our board better information on which to make the determination."
(It's also possible that such blight studies were necessary given that projects like AY were less clearly in the public interest than housing projects.)
"So the whole board looks at the study?" Perkins followed up. "What do they bring to understand that these conditions are not worthy, or worthy of being designated as blight? What are the skills that they bring?"
"They just bring their general expertise," Laremont responded. "They read the studies... We even go into things like aging of decayed buildings... whether it's something that's occurred over a long period of time. It's done in a way to allow lay people to make judgments."
"Would laypeople be, like, people in the neighborhood, where the so-called study is being done?" Perkins asked. "Would they be considered qualified?"
"If they were on our board of directors," Laremont responded.
(Board members are team players and big donors, as I've pointed out.)
"Does the study include the opinions of people in the neighborhood?" Perkins asked.
No, said Laremont, indicating it was simply "empirical information."
What about the opinions of the property owners--or interviews?
Neither are in the blight study. However, said Bloch, "the hearing process we undertake does accumulate all the input," including from public hearings, and that's delivered to the board.
"Do the board members get to view the scene of the crime, where the blight study is done?" Perkins asked.
"They generally don't," Laremont said.
"The only thing they have is the study," Perkins said.
It includes photos, Laremont said, some by the consultants and some by the project applicants.
Perkins asked if the board ever disagreed.
Laremont said she didn't know.
"Every time there was a blight study recommending blight, the board has agreed--rubberstamped it?" Perkins asked.
"I wouldn't say that the fact that they agree is a rubber stamp," Laremont said. "I'd say we do good blight studies."
Perkins asked about the legal standard for judicial review of ESDC's blight studies.
It's whether they are arbitrary and capricious, Laremont responded.
"One court kinda said it was," said Perkins, who suggested that the "reasonable person" standard might mean someone in the community.
How are consultants hired?
Primarily via requests for proposals, Laremont said. "We also are able to hire people on the basis of a sole source if we can articulate a rationale for why it would be cost effective or otherwise appropriate."
Perkins asked how often AKRF has been used.
Laremont acknowledged it was at least ten times, and then had trouble coming up with a list of other consultants.
Perkins asked for a list of projects in which AKRF had been used.
Perception of fairness
Perkins also asked for a list of project in which AKRF has done studies for the developer as well as for the ESDC. (It wasn't clear whether he meant simultaneous or consecutive studies.)
"I think that's an Achilles heel in terms of public perception of the fairness of the project," he said. "It just doesn't look good. Do you think there's any merit to changing that?"
Laremont responded, "We would always be happy if there were more capable and qualified consultants to do this work."
Why haven't you used more firms, Perkins asked.
Laremont described the Catch-22: "Because we need them to be capable and qualified to do the work. We need them to have the proper expertise on their staff."
"So they are sort of the only ones in the world that can do this for you?" Perkins asked.
"As I said, it's not that they're the only ones, it's that they're the most well-qualified," Laremont responded. "They have a a very large staff, a very great depth of expertise, a long track record."
Agreement with developer
"Have they ever given you a study where blight did not exist?" Perkins asked. "Are their studies always consistent with the developer that they use? A developer, let's call it Columbia. Are they always consistent?"
Bloch responded, "The developer doesn't say this is blight. They paint a picture, they gather information--"
Perkins cut him off: "They go out, they do a study. Now they're going to come back with a study for Columbia. Why do you use that same company that has already come in prejudiced? I can't believe you can't see what I'm saying."
Bloch responded carefully: "You could also say that the organization is choosing projects that are providing development in communities that they believe or we believe--
Perkins again interjected, "If they say blight over here and you hire them to do the same study, how do you get any sense that you're getting a sort of objective... why use the same company and make it look so colluded?"
Laremont responded, "My answer to that is that its simply information and data that they are giving us. If they were giving us an opinion, that would be one thing, but they're giving us data."
Getting the best
Perkins acknowledged the desire to hire the best-qualified consultant, "but if the best places a potential conflict, don't you have to come up with someone who may not be the best... is there no one else that can give you a good report?"
Laremont replied, "We did use EarthTechh ultimately [in the Columbia case], but I think the difference of opinion has to do with our perspective about what the nature of the study is. If we were talking about a qualitative judgement-driven analysis with opinion, I'd agree wholeheartedly with you."
"No one else could have found the facts?" Perkins asked, querying whether blight is subjective or scientific.
"The determination of whether or not there's blight at the end of the day is a judgment of our board," Laremont maintained.
Perkins asked what the consultants provide.
"They give you facts," Laremont said.
"No one else can give you facts?" asked Perkins. "What would be a distinctive difference between AKRF and the next best that's in your portfolio? They could see a crack that no one else could see?"
"It's not that other people couldn't see the facts," Laremont responded. "They need to document those facts in a way that results in a document that we can use."
"Who's second best in your shop to do this kind of work?" Perkins asked.
"We might use EarthTech," Laremont said.
"Why would we not use EarthTech just for the sake of not using the same person?" Perkins asked.
Bloch said they did.
Perkins said that ESDC used AKRF first.
"You could've just done EarthTech," Perkins observed. "There would at least be some distance that would give some integrity... the same company working for Columbia is working for you."
At the end of the ESDC segment (not on video), Perkins tried to get the ESDC reps to consider policy changes: "Has it occurred to you that there's some changes that might need to be made, for the sake of nothing else but public perception?"
Bloch responded that that was an issue for policy makers, not an administrative agency.
"You implanted it, and you bumped into things," Perkins pressed on. "Have you any recommendations for improving the public perception of this process, such that we would have a higher level of confidence?"
Bloch stood his ground: "As an administrative agency, I don't think we're prepared to offer recommendations."
"But it has occurred to you that some changes might be useful?" Perkins asked.
"I think we would welcome anything that provides greater confidence in the most dramatic of government powers," Bloch said. "What that is, how that could happen, I don't think we're [inaudible] to offer that."
The full hearing